LONDON – Xstrata's board is expected to recommend Glencore's revised
$34-billion bid as early as next week, sources close to the deal say,
although it may come with some qualification surrounding such issues as
staff retention.

Glencore, already Xstrata's biggest shareholder with a 34% stake, made
its original recommended all-share offer in February but hit trouble in
June when the company's second-biggest investor Qatar Holding demanded
an improved deal.

Detailing the new offer on Monday, Glencore said Xstrata shareholders
would now get 3.05 shares for every Xstrata share held, instead of the
previous offer of 2.8 shares.

However, under the new proposal its own
CE, Ivan Glasenberg, is to take over the helm of the combined business from Xstrata's chief executive Mick Davis, who would have stayed for at least three years under the original deal.

Instead, Davis, who has led Xstrata for over a decade, will leave within six months.
"We all agree that 3.05 is better, and that if you were happy with 2.8,
you should be happy with 3.05," one source involved in the deal said.

"But it is all work in progress. There are a lot of people saying this
is a slam dunk, but the board has a duty ... to ensure they are
comfortable they have the right construct (and can) retain key
operational personnel."

It was not clear what changes the Xstrata board could request or
demand, but one of the sources said the board could seek guarantees from
Glencore for managers it sees as key:
"It will take more than just
reassurance."

A separate source said any changes were likely to come in Xstrata's
controversial retention package for more than 70 key executives, though
others said that was not likely to change.

Operational and management issues are key for Xstrata and at the
forefront of concerns for the board, several of the sources said, as the
miner shifts from an acquisition-fuelled first decade into a phase of
organic growth which the miner hopes will boost volumes by 50% by the
end of 2014 and cut costs.
Xstrata's board has until September 24 to decide whether or not to
recommend the revised offer. Hostile bids are unusual in mining, a
sector in which many large deals and mega-mergers have failed to
materialise for a variety of reasons including political and regulatory
issues and a tie-up between Xstrata and Glencore would be the
second-biggest deal in the sector to date.

MEETINGS CONTINUE
Several sources said the board - set to meet this week and next as
talks continue between independent directors and shareholders - had not
yet taken a final decision on details including changes to the staff
retention package, for example, but could reach an agreement before the
deadline of September 24.
"Meetings are still going on. The board will have a range of views to consider," another source familiar with the deal said.
Shareholders have been broadly supportive of the revised offer, though
Qatar, which has backed Xstrata's management, has yet to make its
decision public. It said earlier this week it was considering its
position.

Most of the sources said they now expected a deal could be done,
however. "We are now far more optimistic than last week.

It looks like
if there is no deal agreed on Monday, then it will be (a few days
later)," one of them said.
Xstrata's independent directors are unlikely to rush their approval,
having come under fire after recommending the original Glencore deal and
the more than £170-million ($274-million) retention package for 73 of
the miner's top managers which many shareholders felt was excessive.

After Glencore's last-minute revision of its offer last week the
directors said in a curt statement that the exchange ratio was
"significantly lower than would be expected in a takeover" and warned of
"significant risk" if Davis were to be replaced as chief executive and
management incentive arrangements altered.

In detailing its revised offer on Monday Glencore took a more
conciliatory tone than when it first made the proposal on Friday, saying
the retention and incentive arrangements would have to be acceptable to
shareholders.

Xstrata Coal announces changes to Australian coal operations

Sydney, 10 September 2012
As part of an ongoing review of its business in Australia, Xstrata
Coal is undertaking a planned restructuring to respond to industry-wide
pressures including low coal prices, high input costs and a strong
Australian dollar against the US dollar.
Following this review, and in keeping with the cost savings
objectives announced at our half-year earnings, we will be reducing our
employee numbers by approximately 600. The reductions involve both
contractors and permanent positions.
Although we are not breaking down the reductions by individual site,
the restructure is focused on scaling back high cost production at
some of our mines. We do not expect a material impact on Australian
production volumes. We are also reducing some roles at our corporate
headquarters in Sydney and consolidating our office-based operations in
Queensland.
Our approved growth projects, such as Ravensworth North, Ulan West
and our expansion at Rolleston, are proceeding as planned, and remain
on budget and on schedule. Feasibility studies into our Wandoan Project
continue, to enable an investment decision once relevant approvals
have been completed and market conditions permit.
Ongoing reviews continue across the business to ensure that Xstrata
Coal retains a highly competitive cost position in the current market
environment. If further adjustments are required, an announcement will
be made at that time. End
Neither the content of the company's website nor the content of any
other website accessible from hyperlinks on the company's website is
incorporated into, or forms part of, this announcement